Spot Bitcoin ETF: What Does Its Approval Mean for Crypto?

Spot Bitcoin ETF: What Does Its Approval Mean for Crypto?

11th Jan, 2024

The first-ever spot Bitcoin ETFs have been approved. Here’s what experts say that could mean for crypto markets and other investments.

On Wednesday, Jan. 10, the Securities and Exchange Commission (SEC) approved the first-ever spot Bitcoin ETFs, including those from Fidelity, BlackRock and Invesco. In total, the SEC approved 11 spot Bitcoin ETFs.

They’re expected to start trading as soon as this week, and their upcoming launch has already had an impact on cryptocurrency markets. The price of Bitcoin jumped more than 7% over the course of Monday, Jan. 8, when CNBC reported that sources close to the SEC said approval was imminent.

But wait — weren’t there already Bitcoin ETFs on the market?

Yes and no. There were already crypto-related ETFs and trusts out there, but there has never been a spot Bitcoin ETF on the market before Wednesday’s approval.

What to expect

For years, institutions like BlackRock were hesitant and dissuaded from entering the Bitcoin market due to a lack of clear legislation and ambiguous accounting standards. However, with the creation of a spot ETF and a green light from the SEC, investment firms can now offer Bitcoin exposure to clients confidently, since ETFs are standard financial instruments with more clarity around their management. Here’s a simple guide to what the approval means for the Crypto Industry:

1. Crypto Goes Mainstream with ETFs:

ETFs in America now allow easy access to Bitcoin. Approval means millions of global investors can buy Bitcoin like any other fund. Big investors, like pension funds, can enter the Bitcoin market for the first time. Shift from 'Should I invest in crypto?' to 'Where can I invest with the lowest fees?' is happening fast.

2. Media Buzz and Marketing for Crypto:

Over 11 approved ETF applications with big names like Blackrock and Grayscale. Major companies like JP Morgan are sponsors. Expect increased marketing and media attention around Bitcoin ETFs. Adverts for Bitcoin ETFs may become as common as those for retirement funds.

3. Potential Bull Run on the Horizon:

Optimists compare ETF impact to how the first gold ETF influenced gold prices. Initial impact might not be immediate but could be sustained. The upcoming 'Bitcoin halving' in April 2024 is creating pricing optimism. Halving events reduce new supply, potentially leading to a significant increase in Bitcoin value. True market surge might occur a few months after the halving event.

4. Growing Consumer Trust:

Institutional investment boosts trust in crypto. Investors can gain exposure to Bitcoin without owning it directly through ETFs. ETFs offer a regulated and familiar investment vehicle. Trust in crypto is currently at an all-time high.

5. Enhanced Liquidity and Market Efficiency:

Institutional participation injects substantial liquidity into the market. Increased trading on regulated platforms fosters greater price discovery. Market efficiency improves, making it easier and more cost-effective to buy or sell Bitcoin ETF shares. Overall, ETF approval enhances market accessibility and efficiency.

What a Bitcoin ETF future will look like

Overall, the approval of these ETFs is undoubtedly a positive development for Bitcoin and the digital asset market as a whole. In the coming years, these ETFs will likely grow in popularity as investors seek the benefits that Bitcoin provides to portfolios. However, unlike much of the wishful thinking that is rooted in the euphoria of approval, this will likely be a gradual process, not something that happens overnight or even with 2024.

Regardless of whether this turns out to be a classic "buy the rumor, sell the news" event, what is more certain is that the arrival of Bitcoin ETFs means that additional demand will now be forced to compete for its finite supply of just 21 million. As Bitcoin begins its new journey on Wall Street, there is little doubt its best days are yet to come.

In sum, experts are divided about the immediate market impact of a spot Bitcoin ETF approval. They agree that it is likely to have a positive effect on the price of Bitcoin — but just how much of a positive effect, and how many other crypto assets will be affected, remains to be seen.


Emmanuel Nchuma

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